Seven superannuation businesses that were classifying new members as ‘smokers’ by default and charging them higher life insurance premiums have ceased this practice, and some trustees have remediated members for the extra premiums paid, according to ASIC.
A statement from the commission says that between 2017 to 2020, it engaged with seven superannuation businesses, (comprising nine superannuation trustees) that had been, either at the time or historically, assigning ‘smoker’ status to members in specific products unless the member took active steps to opt out of the categorisation.
They are AMP, Colonial First State, Equity Trustees, IOOF (including OnePath), Intrust, Netwealth, and Suncorp.
ASIC says that following the engagement, it was able to confirm that:
- All seven superannuation businesses stopped charging new members life insurance premiums at smoker rates by default
- All seven superannuation businesses moved, or are in the process of moving, existing members paying premiums at ‘smoker’ rates by default onto non-smoker or blended rates
- Four superannuation businesses refunded or agreed to refund members for the extra premiums paid because of the default ‘smoker’ classification.
ASIC Commissioner Danielle Press says that generally, insurance premiums for smokers are substantially higher than for non-smokers. Given the low prevalence of smoking among Australian adults, classifying members as ‘smokers’ for insurance offered through superannuation unless the member takes active steps to confirm non-smoking status “… is contrary to community expectations”.
“Insurance in super is complex. Many Australians may not realise that default classifications can impact the price of their cover and therefore, reduce their retirement benefits. In light of the low smoking rate, merely providing disclosure and putting the onus on members to act is not enough to support good member outcomes,” she says.
Press adds that all trustees ASIC raised these concerns with have ended this practice with new members. Many have decided to refund affected members, in part or in full, for the higher insurance costs.
When planned remediation is complete, more than 5,000 members will have received more than $3.6 million in compensation.
“Those trustees that have committed to remediation are heeding the lessons of the Financial Services Royal Commission – that trustees should seek to achieve outcomes for members in line with community standards and expectations,” she says.
